British spending on welfare grows faster than European neighbours, while other
major powers cut back, according to figures from the OECD

Welfare spending in Britain has increased faster than almost any other country in Europe since 2000, new figures show.

The cost of unemployment benefits, housing support and pensions as share of the economy has increased by more than a quarter over the past thirteen years – growing at a faster rate than in most of the developed world.

Spending has gone up from 18.6 per cent of GDP to 23.7 per cent of GDP – an increase of 27 per cent, according to figures from the OECD, the club of most developed nations.

By contrast, the average increase in welfare spending in the OECD was 16 per cent.

The figures come on the day George Osborne tells the rest of Europe to curb its welfare spending and increase competition or face stagnation, saying: "Our continent is falling behind. Reform or decline."

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In the developed world, only the United States and the stricken eurozone states of Ireland, Portugal and Spain - which are blighted by high unemployment - have increased spending quicker than Britain.

It means Britain has risen in the developed world rankings for welfare spending from 20th in 2000 to 13th in 2013 – leapfrogging Norway, Luxembourg, Hungary, Poland, Greece and New Zealand.

Despite Mr Osborne’s promise to get welfare under control, the benefits bill is due to increase rapidly in cash terms, from £180bn this year to £203bn in 2018-19.

Iain Duncan Smith, the work and pensions secretary, last year admitted he had given up trying to cut the welfare bill and was instead “managing growth at a lower level”.

Over the thirteen years from 2000, Germany has welfare spending as a share of GDP by 1.5 per cent, while Israel cut spending by 8.1 per cent. Such reductions are possible by increasing welfare bills at a lower rate than growth in the economy.

Other countries have seen lower increases in welfare spending than Britain: 2 per cent in Poland, 12 per cent in Australia, 10 per cent in Canada and 15 per cent in France.

And in Britain since 2010, when the Coalition came to power, spending on welfare as share of GDP has barely moved – falling by just a quarter of one per cent over three years, according to OECD data.

By contrast, more than a third of developed nations have cut their welfare bills steeply in that period. Germany has cut social security spending as a share of GDP by 3.4 per cent, Canada by 3 per cent, Iceland by 4.2 per cent, Switzerland by 7 per cent and Estonia by 11 per cent.

The biggest spender on welfare in the developed world is France, at 33 per cent of GDP. But its rate of increase has been slower than the OECD average, at 15.4 per cent.

It is followed by Denmark, Belgium and Finland (30 per cent), Sweden, Italy and Austria (28 per cent) and Spain (27 per cent).

Douglas Carswell, a Conservative MP, said the figures showed radical rhetoric on welfare from the Coalition had not yet yielded results. "We are in the 1970s stage. We can see the need for change but policy makers are not prepared for the root and branch reforms that are needed. We are not just competiting against France and Italy, but Indonesia, Turkey, Brazil and China. We need to wake up."